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Category: Stock Market and Snap-on
Date: 9 October 2019 Stock Price: $151.89 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of Snap-on a manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions
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About Snap-on
Snap-on Incorporated is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks. Products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. Snap-on also derives income from various financing programs to facilitate the sales of its products and support its franchise business. Products and services are sold through the company’s franchisee, company-direct, distributor and internet channels. Founded in 1920, Snap-on is a $3.7 billion, S&P 500 company headquartered in Kenosha, Wisconsin.
Overview of Snap-on's latest earnings report
Data below is reported for the latest quarter unless stated otherwise
- Net sales: $951.3 million (down from $954.6 million for the same quarter of the previous year)
- Net sales decreased by -0.343% over the last 12 months
- Cost of goods sold: $477.5 million (up from $467.5 million for the same quarter of the previous year)
- Cost of goods sold increased by 2.1% over the last 12 months
- Net income: $184.9 million (up from $182.7 million for the same quarter of the previous year)
- Diluted earnings per share: $3.22 (up from $3.12 for the same quarter of the previous year)
- PE ratio: 11.79
- Diluted weighted-average shares outstanding: 56 million (down from 57.3 million for the same quarter of the previous year)
- Cash and cash equivalents: $164 million
- Cash and cash equivalents per share: $2.92
- Cash and cash equivalents makes up 1.92% of Snap-on's market capital
- Cash and cash equivalents makes up 2.95% of Snap-on's total assets
- Trade and others receivables: $684.1 million
- Trade and others receivables makes up 12.3% of Snap-on's total assets
- Inventories: $725.8 million
- Inventories makes up 13.1% of Snap-on's total assets
- Cash generated from operations : $145.5 million
- Cash generated from operations per share: $2.59
- Stockholders equity of Snap-on: $3.308 billion
- Stockholders equity per share: $60.85
- So Snap-on is trading at 2.49 times its stockholders equity which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
Snap-on's management commentary on the results and outlook
KENOSHA, Wis.--(BUSINESS WIRE)--Jul. 18, 2019-- Snap-on Incorporated (NYSE: SNA), a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks, today announced operating results for the second quarter of 2019.
“We are encouraged by our second quarter 2019 results. While sales were mixed in the period, we did experience clear sales gains to customers across our U.S. operations and delivered overall organic growth, overcoming the variation and the turbulence,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “The quarter did see continuing headwinds related to particularly challenged geographies and to unfavorable currency, but the effectiveness of our Snap-on Value Creation Processes drove strength in our operating earnings margins and yet another year-over-year increase in earnings per diluted share. Despite the challenges of this period, we believe the overall macro-economic environment for the vehicle repair and the critical industries markets we serve generally remain robust and provide continuing opportunities to make work easier for serious professionals. Finally, our results are only possible with the ongoing capability and contributions from our franchisees and associates, and I thank them for their dedication and commitment.”
Outlook
Snap-on expects to make continued progress in 2019 along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, Snap-on expects that capital expenditures in 2019 will be in a range of $90 million to $100 million, of which $48.2 million was incurred in the first six months of the year.
Snap-on currently anticipates that its full year 2019 effective income tax rate will be comparable to its full year 2018 effective tax rate of 24.0%.
“We are encouraged by our second quarter 2019 results. While sales were mixed in the period, we did experience clear sales gains to customers across our U.S. operations and delivered overall organic growth, overcoming the variation and the turbulence,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “The quarter did see continuing headwinds related to particularly challenged geographies and to unfavorable currency, but the effectiveness of our Snap-on Value Creation Processes drove strength in our operating earnings margins and yet another year-over-year increase in earnings per diluted share. Despite the challenges of this period, we believe the overall macro-economic environment for the vehicle repair and the critical industries markets we serve generally remain robust and provide continuing opportunities to make work easier for serious professionals. Finally, our results are only possible with the ongoing capability and contributions from our franchisees and associates, and I thank them for their dedication and commitment.”
Outlook
Snap-on expects to make continued progress in 2019 along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, Snap-on expects that capital expenditures in 2019 will be in a range of $90 million to $100 million, of which $48.2 million was incurred in the first six months of the year.
Snap-on currently anticipates that its full year 2019 effective income tax rate will be comparable to its full year 2018 effective tax rate of 24.0%.
Snap-on (NYSE: SNA) stock price history
The image below, obtained from Google, shows the stock price history of Snap-on over the last 5 years. And it's been a pretty good time for Snap-on stockholders. 5 years ago it was trading at $115.80 and its currently trading at around $151.89 a stock. That's a return of 31.16% provided to Snap-on stockholders over the last 5 years. While the returns aren't bad the opportunity cost of holding Snap-on that made just 31% over the last 5 years compared to holding Netflix for example that made over 300% becomes very significant. The stock of Snap-on is trading at a lot closer to its 52 week low of $135.29 than it is to its 52 week high of $180.46 which to us is a clear indication that the short term sentiment and momentum of Snap-on's stock is negative at this point in time.
Recent coverage of Snap-on
The extract below discusses Snap-on's acquisition of Cognitran a UK based firm as obtained from TheStreet.com
Snap-on Incorporated (NYSE: SNA), a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks, today announced that it has acquired Cognitran Limited ("Cognitran") for approximately $31 million in cash. Based in Chelmsford, United Kingdom, Cognitran specializes in flexible, modular and highly scalable "Software as a Service" (SaaS) products for original equipment manufacturer ("OEM") customers and their dealers, focused on the creation and delivery of service, diagnostics, parts and repair information to the OEM dealers and connected vehicle platforms. Cognitran will be part of the company's Repair Systems & Information Group. The acquisition enhances and expands Snap‑on's capabilities in providing shop efficiency solutions through integrated upstream services to OEM customers in automotive, heavy duty, agricultural and recreational applications.
Snap-on Incorporated (NYSE: SNA), a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks, today announced that it has acquired Cognitran Limited ("Cognitran") for approximately $31 million in cash. Based in Chelmsford, United Kingdom, Cognitran specializes in flexible, modular and highly scalable "Software as a Service" (SaaS) products for original equipment manufacturer ("OEM") customers and their dealers, focused on the creation and delivery of service, diagnostics, parts and repair information to the OEM dealers and connected vehicle platforms. Cognitran will be part of the company's Repair Systems & Information Group. The acquisition enhances and expands Snap‑on's capabilities in providing shop efficiency solutions through integrated upstream services to OEM customers in automotive, heavy duty, agricultural and recreational applications.
Snap-on (NYSE: SNA) latest stock valuation
So what is Snap-on's stock worth based on the release of their latest earnings report and the outlook provided for the rest of Snap-on 2019 fiscal year? Based on Snap-on's latest earnings and their outlook provided our valuation model provides a target (full value) price at $166.20 a Snap-on stock. We therefore believe that the stock is undervalued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $166.20. Therefore we see a good entry point into Snap-on's stock at $149.6 or below. Since the stock of Snap-on is currently trading at well below our recommended entry point into Snap-on we rate Snap-on stock as a buy
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $166.20. Therefore we see a good entry point into Snap-on's stock at $149.6 or below. Since the stock of Snap-on is currently trading at well below our recommended entry point into Snap-on we rate Snap-on stock as a buy